Internationals has definitely underperformed in the past several years. I started investing in 2013 (60 total US, 40 international). My whole investing experience feels as if I am pouring money down the drain with Internationals. But I have to remind myself that these past several years are just a blip in time if I will be investing for 30-40+ years (I am 38 now, longevity runs in my family tree).

Plus, Internationals actually outperformed around 2002-2008 (the period which I missed because I was still in school with no money to invest).

I am glad we have this forum to remind me and others to “stay the course” and that keeping a fixed allocation is probably better than chasing recent past performance. “Don’t do something. Just stand there.” I am just going to focus my time on my baby, wife, career, and growing our backyard garden.

Substitute age 35 for 38 and lawn for backyard garden and that post could have been mine! Also toddler for baby, since our rugrat is 2.5 already.

You have 40% in international? Or you have 60% in equities (with 40% of the 60% being international) and 40% in bonds? Just asking because a 60/40 stocks/bond split seems fairly normal around here, but 40% in international as percentage of just stocks, much less overall portfolio, seemed kind of high.

You have 40% in international? Or you have 60% in equities (with 40% of the 60% being international) and 40% in bonds? Just asking because a 60/40 stocks/bond split seems fairly normal around here, but 40% in international as percentage of just stocks, much less overall portfolio, seemed kind of high.

Actually that is not high for international. Many bogleheads invest in the all world index for their equity holding which would be around 40% international. I’m not smarter than the market and I don’t believe in American exceptionalism

Sorry, to clarify: 60 total US equities, 40 international equities, 0 bonds. I have a long time horizon with longevity in my genes (if God doesn’t take me out with a freak car accident tomorrow). So I am 100% equities.

Vanguard recommends 40 internationals. Bogle and Buffett recommends 0 international. Who’s right? Again, only God knows. But either way, we are splitting hairs. Any difference in performance may be just a few percentage points (which pales in comparison to the compounding and dollar cost averaging gains from disciplined 30-40 years investing).

Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."

Sorry about that Taylor. I was hoping to get some advice about what to do based on my desire to get to the TFP type account. I will see what transpires in my original post.Hopefully sage advice as I have always had on this forum!
Cheers.....

The inception date of Vanguard Total Bond Market Index Fund (VBTLX) was 12/11/1986.

The inception date of Vanguard Total Stock U.S. Stock Market Index Fund (VTSAX) was 4/27/1992.

The inception date of Vanguard Total International Stock Index Fund (VTIAX) was 4/29/1996.

Per Morningstar, as of 5/18/2020, if you had invested $10,000 in each of the three funds on 4/29/1996, you would currently have $70,619 in your Total Stock U.S. Stock Market Index Fund, $33,966 in your Total Bond Market Index Fund, and $25,495 in your Total International Stock Index Fund.

Of course, no guarantees going forward. Past performance does not indicate future performance.

Best,
oldzey

"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

Internationals has definitely underperformed in the past several years. I started investing in 2013 (60 total US, 40 international). My whole investing experience feels as if I am pouring money down the drain with Internationals. But I have to remind myself that these past several years are just a blip in time if I will be investing for 30-40+ years (I am 38 now, longevity runs in my family tree).

Plus, Internationals actually outperformed around 2002-2008 (the period which I missed because I was still in school with no money to invest).

I am glad we have this forum to remind me and others to “stay the course” and that keeping a fixed allocation is probably better than chasing recent past performance. “Don’t do something. Just stand there.” I am just going to focus my time on my baby, wife, career, and growing our backyard garden.

Recency bias is a powerful thing with the human brain. Great job staying the course and not giving into the temptation of dumping international. A true boglehead and not a performance chasers. Well-done.

Internationals has definitely underperformed in the past several years. I started investing in 2013 (60 total US, 40 international). My whole investing experience feels as if I am pouring money down the drain with Internationals. But I have to remind myself that these past several years are just a blip in time if I will be investing for 30-40+ years (I am 38 now, longevity runs in my family tree).

Plus, Internationals actually outperformed around 2002-2008 (the period which I missed because I was still in school with no money to invest).

I am glad we have this forum to remind me and others to “stay the course” and that keeping a fixed allocation is probably better than chasing recent past performance. “Don’t do something. Just stand there.” I am just going to focus my time on my baby, wife, career, and growing our backyard garden.

Recency bias is a powerful thing with the human brain. Great job staying the course and not giving into the temptation of dumping international. A true boglehead and not a performance chasers. Well-done.

There are a few things that make me very happy with how I've invested:

-I've had the same asset allocation, a 56/24/20 three-fund portfolio since I started at age 22. I am 35 now.
-I have been tempted to change courses or "tinker," but have never done so. Small cap value, long-term treasury funds, etc. have all been tempting at times.
-I have never sold one cent in equities. I've sold TSM and repurchased S&P 500 index to harvest tax losses, but I've never actually reduced my equity dollars by selling.
-I have maintained very close to my 56/24/20 balance, which means more and more international shares being purchased over the years as it has underperformed.
-I have not chased performance.

Internationals has definitely underperformed in the past several years. I started investing in 2013 (60 total US, 40 international). My whole investing experience feels as if I am pouring money down the drain with Internationals. But I have to remind myself that these past several years are just a blip in time if I will be investing for 30-40+ years (I am 38 now, longevity runs in my family tree).

Plus, Internationals actually outperformed around 2002-2008 (the period which I missed because I was still in school with no money to invest).

I am glad we have this forum to remind me and others to “stay the course” and that keeping a fixed allocation is probably better than chasing recent past performance. “Don’t do something. Just stand there.” I am just going to focus my time on my baby, wife, career, and growing our backyard garden.

Recency bias is a powerful thing with the human brain. Great job staying the course and not giving into the temptation of dumping international. A true boglehead and not a performance chasers. Well-done.

There are a few things that make me very happy with how I've invested:

-I've had the same asset allocation, a 56/24/20 three-fund portfolio since I started at age 22. I am 35 now.
-I have been tempted to change courses or "tinker," but have never done so. Small cap value, long-term treasury funds, etc. have all been tempting at times.
-I have never sold one cent in equities. I've sold TSM and repurchased S&P 500 index to harvest tax losses, but I've never actually reduced my equity dollars by selling.
-I have maintained very close to my 56/24/20 balance, which means more and more international shares being purchased over the years as it has underperformed.
-I have not chased performance.

Why aren’t total international BOND funds included in the 3 fund portfolio?

nanameg:

Bonds are primarily for safety.

Almost any low-cost, safe, liquid, diversified, good quality, fixed-income security will provide portfolio safety. My choice of fixed-income for The Three-Fund Portfolio is the Vanguard Total Bond Market Index Fund (VBTLX or BND) whose worst annual return since inception was -2.66% in 1994 (it gained +16% in 1995). I also like TBMs great diversification (the only "free-lunch" in investing).

Adding more funds increases complexity and often results in increased risk and lower returns.

Taylor why do u think vanguard uses total international bonds in their TDFs?

I used to hold a small amount of international bonds. Did not really do anything that Total Bond was not already doing. I consolidated back to Total Bond. I found it interesting that Vanguard's research report on international bonds was a very weak case. Consider reading the report on the website.

John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

Taylor why do u think vanguard uses total international bonds in their TDFs?

I used to hold a small amount of international bonds. Did not really do anything that Total Bond was not already doing. I consolidated back to Total Bond. I found it interesting that Vanguard's research report on international bonds was a very weak case. Consider reading the report on the website.

This is a perspective only a 2 or 3 funder could have. I don't compare the components of my portfolio to each other. Why would I?

You don't compare the relative performance of small cap growth to large cap value within your total stock market fund. Why would you? You own both.

It is also important to understand that adding funds to a personal portfolio increases complexity. However, adding funds to a Target Fund does not in increase complexity for the investor.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "I'm not into all these market strategies and theories and cost-benefit analyses - all the bureaucracy that goes with business."

Taylor,
I’ve been reading both your book and the back and forth on this forum about international stock funds and I’m so tempted to go more simple and just have a two fund portfolio. 50/50 and call it a day. I’m afraid to not do what the experts...both you and Vanguard suggest however. I’m afraid to go THAT simple...just 2 funds, 50/50. But I find that so easy and elegant.

Taylor,
I’ve been reading both your book and the back and forth on this forum about international stock funds and I’m so tempted to go more simple and just have a two fund portfolio. 50/50 and call it a day. I’m afraid to not do what the experts...both you and Vanguard suggest however. I’m afraid to go THAT simple...just 2 funds, 50/50. But I find that so easy and elegant.

The beauty and simplicity of the Two Fund Portfolio as recommended by Jack Bogle and Warren Buffet, and the Three Fund Portfolio is that both portfolios will never be below average!

The right portfolio is the one that works for you!

John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

I slightly prefer The 3-Fund portfolio with 20% of equity in international stocks. However, I am also a fan of the 2-Fund Portfolio for its simplicity (read my link below).

It is hard to go wrong with either of these total market indexed portfolios.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course."

I think that’s what I’m beginning to understand...that I really can’t go wrong with either portfolio and I’m agonizing over splitting hairs.

I never was truly comfortable with the 4 fund portfolio I was trying to mirror in three different accounts for several years. I was especially unsure about the international funds but they were recommended by Vanguard so I went with them. We’re coming up on retirement and I panicked this March and first sold off the international stocks...that opened the floodgates and I sold everything a few days later.

I’m back in with a four fund portfolio from a PAS advisor and a two fund 50/50 in my husbands employer account that the advisor can’t manage. So far these last few weeks I’m much happier with the 2 fund ...just for sheer ease in following and contributing.

I slightly prefer The 3-Fund portfolio with 20% of equity in international stocks. However, I am also a fan of the 2-Fund Portfolio for its simplicity (read my link below).

It is hard to go wrong with either of these total market indexed portfolios.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course."

I think that’s what I’m beginning to understand...that I really can’t go wrong with either portfolio and I’m agonizing over splitting hairs.

I never was truly comfortable with the 4 fund portfolio I was trying to mirror in three different accounts for several years. I was especially unsure about the international funds but they were recommended by Vanguard so I went with them. We’re coming up on retirement and I panicked this March and first sold off the international stocks...that opened the floodgates and I sold everything a few days later.

I’m back in with a four fund portfolio from a PAS advisor and a two fund 50/50 in my husbands employer account that the advisor can’t manage. So far these last few weeks I’m much happier with the 2 fund ...just for sheer ease in following and contributing.

I also wonder what would we say after 20 years. Would Vanguard advisors 4 funds returns better over 2-3 funds? Maybe or maybe not. Lets watch and report back later

"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

I'll still hold EM in the total int'l stock fund because one of my accounts doesn't have a better alternative. This would work out to to about 3.4% EM and about 1.5% China right now in my total portfolio (stocks and bonds).

China has coerced the indexers to add hundreds of additional Chinese companies. Vanguard EM is now up to 43% China and will probably go much higher. There are two main problems with investing in China. One is the price dilution effect on share-owners when companies issue lots of new shares. The other is the probability that China won't be bullied in trade disputes with the US and could take possession of US-owner shares.

The general problem with EM is that the expected high growth may primarily take place in private companies and stop before they go public. And again, the dilution effect for public companies.

China is 43% of emerging markets, which is about 23% of international, which is 45% of the global market cap. Thus, even if you hold global market cap equities, you'll only be investing 4-5% of equities in Chinese companies, domiciled in a country that houses 17-18% of the world's population.

I slightly prefer The 3-Fund portfolio with 20% of equity in international stocks. However, I am also a fan of the 2-Fund Portfolio for its simplicity (read my link below).

It is hard to go wrong with either of these total market indexed portfolios.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course."

I think that’s what I’m beginning to understand...that I really can’t go wrong with either portfolio and I’m agonizing over splitting hairs.

I never was truly comfortable with the 4 fund portfolio I was trying to mirror in three different accounts for several years. I was especially unsure about the international funds but they were recommended by Vanguard so I went with them. We’re coming up on retirement and I panicked this March and first sold off the international stocks...that opened the floodgates and I sold everything a few days later.

I’m back in with a four fund portfolio from a PAS advisor and a two fund 50/50 in my husbands employer account that the advisor can’t manage. So far these last few weeks I’m much happier with the 2 fund ...just for sheer ease in following and contributing.

I have talked to enough folks that did what you did in March: panicked and sold international. That is the key and a huge piece of the puzzle. What can you stay with in all types of markets. A rising tide lifts all boats and our thoughts on risk established (or so we think). Once the water recedes, we question, rethink our tolerance for risk, and sell the funds that we probably should never have had in the first place.

The older I get I do not get caught up in the whole "what fund, what fund, what perfect portfolio" thing. I realize that the macro high level items are what matter: spend less than you make, save and invest you must, keep costs low, keep taxes low, own index funds, have enough cash, pay down/off debt.

The rest in terms of international, small, emerging, gold, really does not stinking matter if you mess up the macro items.

30,000 foot view!

Last edited by abuss368 on Fri May 22, 2020 7:48 pm, edited 1 time in total.

John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

I slightly prefer The 3-Fund portfolio with 20% of equity in international stocks. However, I am also a fan of the 2-Fund Portfolio for its simplicity (read my link below).

It is hard to go wrong with either of these total market indexed portfolios.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course."

I think that’s what I’m beginning to understand...that I really can’t go wrong with either portfolio and I’m agonizing over splitting hairs.

I never was truly comfortable with the 4 fund portfolio I was trying to mirror in three different accounts for several years. I was especially unsure about the international funds but they were recommended by Vanguard so I went with them. We’re coming up on retirement and I panicked this March and first sold off the international stocks...that opened the floodgates and I sold everything a few days later.

I’m back in with a four fund portfolio from a PAS advisor and a two fund 50/50 in my husbands employer account that the advisor can’t manage. So far these last few weeks I’m much happier with the 2 fund ...just for sheer ease in following and contributing.

In a while if you are more comfortable with the Two Fund Portfolio as recommended by Jack Bogle and Warren Buffett, you can exit Vanguard PAS, sell the international stocks and bonds, save the 0.30 in fees, and move to the Two Fund.

My folks retired a while ago on Jack and Warren's Two Fund Portfolio and have done well. No issues. Happy and it simply has worked.

John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

I'll still hold EM in the total int'l stock fund because one of my accounts doesn't have a better alternative. This would work out to to about 3.4% EM and about 1.5% China right now in my total portfolio (stocks and bonds).

China has coerced the indexers to add hundreds of additional Chinese companies. Vanguard EM is now up to 43% China and will probably go much higher. There are two main problems with investing in China. One is the price dilution effect on share-owners when companies issue lots of new shares. The other is the probability that China won't be bullied in trade disputes with the US and could take possession of US-owner shares.

The general problem with EM is that the expected high growth may primarily take place in private companies and stop before they go public. And again, the dilution effect for public companies.

EM seems like very high risk for possibly little reward, or worse.

I do not believe the shares in Chinese companies have voting rights and are perhaps American ADR.

John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

I slightly prefer The 3-Fund portfolio with 20% of equity in international stocks. However, I am also a fan of the 2-Fund Portfolio for its simplicity (read my link below).

It is hard to go wrong with either of these total market indexed portfolios.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course."

I think that’s what I’m beginning to understand...that I really can’t go wrong with either portfolio and I’m agonizing over splitting hairs.

I never was truly comfortable with the 4 fund portfolio I was trying to mirror in three different accounts for several years. I was especially unsure about the international funds but they were recommended by Vanguard so I went with them. We’re coming up on retirement and I panicked this March and first sold off the international stocks...that opened the floodgates and I sold everything a few days later.

I’m back in with a four fund portfolio from a PAS advisor and a two fund 50/50 in my husbands employer account that the advisor can’t manage. So far these last few weeks I’m much happier with the 2 fund ...just for sheer ease in following and contributing.

I have talked to enough folks that did what you did in March: panicked and sold international. That is the key and a huge piece of the puzzle. What can you stay with in all types of markets. A rising tide lifts all boats and our thoughts on risk established (or so we think). Once the water recedes, we question, rethink our tolerance for risk, and sell the funds that we probably should never have had in the first place.

The older I get I go not get caught up in the whole "what fund, what fund, what perfect portfolio" thing. I realize that the macro high level items are what matter: spend less than you make, save and invest you must, keep costs low, keep taxes low, own index funds, have enough cash, pay down/off debt.

The rest in terms of international, small, emerging, gold, really does not stinking matter if you mess up the macro items.

Great thread Taylor. This is my favorite thread on the forum. Shortly after joining the forum, I changed over to the 3 fund portfolio (70/15/15). I have always enjoyed movies such as Wall Street, but before joining the forum I knew very little about investing. I have learned a lot from reading here along with the bogleheads wiki page.

I think savings rate is the key.

BTW - I also like the 2 fund portfolio but slightly prefer the 3 fund portfolio. I like the s&p500 but slightly prefer the total market index.

I slightly prefer The 3-Fund portfolio with 20% of equity in international stocks. However, I am also a fan of the 2-Fund Portfolio for its simplicity (read my link below).

It is hard to go wrong with either of these total market indexed portfolios.

Best wishes.
Taylor

Jack Bogle's Words of Wisdom: "The winning formula for success in investing is owning the entire stock market through an index fund, and then doing nothing. Just stay the course."

Taylor, you mentioned using a Tax exempt Bond fund for a taxable account if there is no room in nontaxable accounts. To maintain my AA I will be buying a bond fund for taxable. In the 22% tax bracket (+ 6% State), which fund would you suggest... intermediate term tax exempt (VWIVX), Tax exempt Muni Bond Fund (VWALX), tax managed Balanced fund (VTMFX), or something else. I may be splitting hairs with this, but I am still learning.
Of course I already use VBTLX in my non taxables.
Thanks!

Taylor, you mentioned using a Tax exempt Bond fund for a taxable account if there is no room in nontaxable accounts. To maintain my AA I will be buying a bond fund for taxable. In the 22% tax bracket (+ 6% State), which fund would you suggest... intermediate term tax exempt (VWIVX), Tax exempt Muni Bond Fund (VWALX), tax managed Balanced fund (VTMFX), or something else. I may be splitting hairs with this, but I am still learning.
Of course I already use VBTLX in my non taxables.
Thanks!

If a bond fund is needed in a taxable account and a tax exempt bond fund makes sense for your personal tax situation, either the Vanguard "active" or the Vanguard index fund are a fine offering. Both will provide safety and income to a portfolio.

John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

Taylor, you mentioned using a Tax exempt Bond fund for a taxable account if there is no room in nontaxable accounts. To maintain my AA I will be buying a bond fund for taxable. In the 22% tax bracket (+ 6% State), which fund would you suggest... intermediate term tax exempt (VWIVX), Tax exempt Muni Bond Fund (VWALX), tax managed Balanced fund (VTMFX), or something else. I may be splitting hairs with this, but I am still learning.
Of course I already use VBTLX in my non taxables.
Thanks!

Randtor:

Assuming you have filled your non-taxable accounts with Vanguard Total Bond Index (VBTLX), and you are in the 22% income tax bracket, I believe you should use the same fund in your taxable account to fill-up your desired bond allocation.

Thank you Abuss368 and Taylor, for your suggestions. I am really trying to simplify my entire portfolio. I was torn what to use in taxable since IRA's are filled and my AA has not yet been met. I will likely use VBLTX in taxable to meet my bond AA, I will also do some research on the Vanguard "active" and the Vanguard index funds as mentioned before making a final decision. Due diligence.
As noted, "simplicity" and "Staying the Course" are the 2 keys.
Thanks!

I switched to the Three-Fund portfolio when I turned 50 a couple years ago. I'm still putting "quarters in the jar" so when markets decline I look upon it as a "sale" and I'm just getting more shares for my automatic investments. Though I have to admit, I stuck my head in the sand during March and April and didn't check my balances. However, my birthday just past and that is my date for annual re-balancing. I was surprised to see that things were relatively stable for my 65/35 (20% in International stock) mix on Vanguard's Portfolio Watch. Stocks were a little lower percentage, but not outrageously so. No doubt things would have looked differently in March or April.
Currently, balances are fairly close to the start of the year.
Stay the course!